Facebook’s acquisition of WhatsApp, and the subsequent announcement that voice calling is coming to WhatsApp, is posing a significant threat to the voice revenues which made mobile operators some of the most profitable companies globally.
Shortly after Facebook announced that it has acquired WhatsApp for $19 billion, WhatsApp said that it will add voice calls to its product in the second quarter of this year.
Mobile messaging services have already done serious damage to mobile operators’ SMS and MMS revenues, and the same may happen to voice revenues if there is an upsurge in the use of mobile messaging voice calls.
What makes Facebook-WhatsApp special in SA
Voice calling through mobile messaging services is nothing new. Skype, WeChat, BBM, Tango, Line, Viber and others have been offering voice calling for a long time but none ever managed to achieve critical mass.
What sets the WhatsApp-Facebook partnership apart from the others is its widespread use in South Africa.
Unofficial figures suggest that there are well above 10 million Facebook and WhatsApp mobile users in South Africa, which – even with overlap between the two apps – represents a sizeable portion of the total number of cellular users in SA.
WhatsApp’s ability to run on most mobile phones also makes it a prime candidate to disrupt traditional SMS and voice services.
Facebook-WhatsApp can own your phone
By combining the services which Facebook and WhatsApp offer, the two companies can provide mobile users with most of the services they require: voice, messaging and social media.
Facebook-WhatsApp can become a users’ home screen, with the mobile operators’ traditional circuit switch calling and SMS services a distant memory.
Even if a user wants to call a mobile number directly, they can achieve this with a VoIP call which is not billed by the mobile operator.
A good data network needed – thanks Vodacom, MTN
All that is needed for any Facebook-WhatsApp system, as the one described in this article, to work effectively is a good quality data network.
Vodacom, MTN, Cell C and Telkom Mobile have been investing billions of rands into fast 3G and LTE networks.
Vodacom also announced that it plans to bring 3G to all regions where it has 2G coverage – hence countrywide.
The mobile operators are therefore providing Facebook-WhatsApp and other mobile messaging services with the perfect platform to attack the mobile operators’ main revenue stream – voice.
Lower smartphone barrier of entry
The last piece of the puzzle, an affordable smartphone, is also now being addressed by the industry.
MTN recently launched the Steppa Smartphone for R499, and all indications show this price will continue to drop.
Mobile operators losing their hold on customers
Over the past decade the mobile operators have lost their grip on their customers. It “owned” its customers through the following:
- A person’s mobile numbers was a great identifier (ID) and the primary way to communicate with them
- SMS provided a great messaging tool to mobile users
- Mobile voice services provided the best and most reliable way to reach and talk to people and interoperability between all handsets was guaranteed by standards
Facebook accounts and mobile messaging contacts have become the preferred ID for many mobile users to contact their friends. This is removing mobile numbers as the default ID.
Mobile messaging is decimating SMS revenue after many smartphones replaced their SMS communication with messaging services.
The last pillar for mobile companies is their biggest revenue stream – voice. The mobile messaging companies are now targeting this service, which could lead to financial challenges for mobile operators in future.
With a combined Facebook and WhatsApp base, there is a good chance that any smartphone will be able to transparently communicate with any other smartphone. This is an industry first.
Can the mobile companies survive the onslaught?
While data revenue is growing, mobile operators continue to trust on their voice revenues to operate and fund network expansion and upgrades.
If there is a sudden upsurge in mobile messaging voice calls which start to impact traditional voice revenues, the mobile operators may be forced to act.
The obvious solution is to shape or block voice over IP (VoIP) traffic on mobile networks. This solution is, however, likely to be met with public resistance and possible regulatory interventions.
Another option is for the operators to start charging higher rates for VoIP data traffic. MTN and Vodacom have already filed higher rates for VoIP traffic – R25 and R10 per MB respectively.
Charging higher fees for VoIP traffic is also likely to result in a backlash from users and regulatory action.
An elegant solution may be for mobile operators to charge for specific services rather than for mobile data products. Users therefore pay for Internet access, voice services, messaging services and the like.
This means that the method in which a voice call is made is irrelevant (whether circuit switch or VoIP), and all voice traffic on the network is billed per minute at standard rates.
This will require deep packet inspection and advanced billing systems, which may not go down well with tech-savvy consumers.
What the future holds
At this stage most mobile operators hope that the WhatsApp’s tie-up with Facebook and the imminent WhatsApp voice service will not result in a significant change in user habits.
They may argue that they have seen these disruptive VoIP technologies before, and that WhatsApp’s voice calling will not be more successful than similar services from BBM, Skype, Viber and others.
However, the scale of Facebook and WhatsApp may mean that a critical mass of users is reached, with the last barriers of performance and cost removed by the mobile operators themselves, making mobile messaging voice calling a viable alternative to traditional voice services.